Strong final quarter for Yum China

A strong fourth quarter has been recorded by Yum China Holdings, which runs KFC and Pizza Hut restaurants on the mainland.

Its unaudited results for the quarter to the end of December show 5 per cent growth in same-store sales, up 7 per cent at KFC and 1 per cent at Pizza Hut.

Total system sales grew 9 per cent, including growth of 11 per cent at KFC and 6 per cent at Pizza Hut, and excluding foreign currency conversion (F/X).

Total revenues were US$2.2 billion, an increase of 13 per cent (9 per cent excluding F/X).

The group opened 339 restaurants during the quarter.

Operating profit rose 23 per cent to $71 million, but excluding special items and F/X, there was a 9 per cent decrease in adjusted operating profit because of product upgrades at Pizza Hut during the quarter, partially offset by strong sales at KFC.

There was an estimated one-time tax charge of $164 million related to tax reform in the US. This resulted in a net loss of $90 million. Excluding this impact, adjusted net income was $74 million, up 12 per cent (18 per cent, excluding F/X).

For the full year, same-store sales were up 4 per cent – an increase of 5 per cent at KFC and 1 per cent at Pizza Hut.

Total system sales grew 8 per cent, including growth of 9 per cent at KFC and 7 per cent at Pizza Hut, excluding F/X.

Total revenues were $7.1 billion, an increase of 6 per cent (8 per cent, excluding F/X).

During the year, 691 restaurants were opened, taking the total store count to 7983 across more than 1200 cities.

Restaurant margin improved 1.5 points to 16.8 per cent, primarily driven by same-store sales and helped by retail tax structure reform.

Operating profit rose 23 per cent to $785 million. Excluding special items, the adjusted operating profit was $782 million, an increase of 20 per cent (23 per cent excluding F/X) driven by strong sales and margin expansion.

Net income dropped 20 per cent to $403 million. Excluding special items, adjusted net income was $564 million, up 20 per cent (24 per cent excluding F/X).

Loyalty program membership grew to more than 110 million for KFC and more than 35 million for Pizza Hut at year end.

Mobile payments accounted for about 53 per cent of company sales during the fourth quarter, while delivery contributed to 14 per cent of company sales for the year.

It was the first full year of Yum China as an independently listed company. CEO Micky Pant will hand over the reins to Joey Wat, currently president and COO, from March.

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